Finance (No. 4) Bill

Andrew Gwynne Excerpts

Wednesday 18th April 2012 Commons Chamber

[Owen Smith]

I knew it would be worth while giving way to the Treasury spokesman for the Democratic Unionist party. His intervention offers a contrast to some of the more pedantic contributions that we have heard from Conservative Members. He is right to say that it was far too early to make a decision, ostensibly based on evidence, just one year after the implementation of the new tax rate. That is what the Institute for Fiscal Studies has concluded, and it is what the Office for Budget Responsibility has effectively concluded in suggesting how uncertain the conclusions are. It is also, unfortunately, what the country is concluding.

[Andrew Gwynne (Denton and Reddish) (Lab)]

The information in the report shows that the cost to the Treasury of the tax cut will be £3 billion. That is rather conveniently predicated on behavioural change bringing in an extra £2.9 billion. Given that scorn has been poured on that figure of £2.9 billion, what confidence does my hon. Friend have that this tax change will not end up costing the Treasury far more than its report suggests?

[Owen Smith]

I have absolutely no confidence whatever. My hon. Friend’s point goes to the heart of the dodgy economics in the dodgy dossier. The figure of £100 million is entirely predicated on the assumption that there will almost be a net offset of the £3 billion static loss as a result of the change to the 50p rate, through people deciding to work harder, save less, take their income in the current year, and hide their income less. Those are the behavioural changes that the Government are assuming will take place, but there is no real evidence base for the change. It is fundamentally dodgy.

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[Owen Smith]

That would be entirely consistent. The Minister knows that our amendment merely asks the Chancellor of the Exchequer to review the possibility of incorporating a bank payroll tax in the bank levy, and to publish a report within six months on how the additional revenue might be spent. We have suggested that we would spend it on creating 100,000 jobs for the unemployed youth of our country, 1 million of whom are still out of work today despite the recent small but welcome fall in unemployment. We would also spend the money on building 25,000 affordable homes, which are equally vital at a time when homelessness is rising at a rate that has not been seen for 25 years.

[Andrew Gwynne]

My hon. Friend is making a compelling case. May I share with him the figures that I have obtained from the House of Commons Library for the 16 to 24-year-olds in the borough of Tameside who are not in employment, education or training or on an apprenticeship? The figure for 2010 stood at an appalling 20%, or one in five. The most recent figure is 33%, or one in three. Does not that show how urgently we need to tackle the underlying structural employment issues in constituencies such as Denton and Reddish?

[Owen Smith]

It absolutely does. On Monday night, I put it to the Chancellor that he and those on his Front Bench were entirely out of touch with the reality in constituencies such as mine and that of my hon. Friend. Pontypridd is fortunate, right now, to have the prospect of a new supermarket opening, which will create 200 jobs, but 2,500 people queued 600 yards down the main street to try to secure one of those jobs. They came not only from my constituency but from right across south Wales. That is the desperate reality that many people in this country are facing. I saw the queue myself, and I know that many of those people were young and eager to work. They also felt that the opportunities for them were diminishing under this Government, rather than increasing. They are looking to the Government, and the Opposition, for action. They want us to put on the table solutions that will deliver growth and jobs and that will stop the economy flatlining.

Unfortunately, the net effect of all the measures in the Budget, including those in clause 209, will be an increase of only 0.1% growth in GDP—[Interruption.] The hon. Member for Vale of Glamorgan (Alun Cairns) shakes his head, but those are the numbers in his Government’s documentation that have been agreed and validated by the OBR: growth of 0.1% in GDP and growth of 0.7% in business investment, which is down almost seven points from where we thought we were going to be just 18 months ago. That is a desperate state of affairs. How on earth can he defend it?

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[Mr Stuart]

My hon. Friend is right. We have heard examples of managing directors of companies being called in by their banks to talk about lending provision because of the threat and uncertainty that this measure brings. It will be extremely disruptive to a fantastic British manufacturing success story. Let me go through the process. The supply chain is in the UK. It is very much concentrated in east Yorkshire but hundreds of people are employed by suppliers elsewhere in Yorkshire and across the country.

[Andrew Gwynne]

The hon. Gentleman is making an eloquent case regarding the supply chain, which is indeed spread right across the United Kingdom. Let me draw to his attention the correspondence I have had from a company called Phantom Ltd, based in Reddish in my constituency, which supplies security and safety systems to the leisure market, including the caravan market. It says that the VAT increase could be “devastating” for its business and that its

“plans for expansion will be severely curtailed and new employment opportunities will be lost.”

Is that not the reality of these measures for the wider supply chain?